The Wall St Journal reports: The bond market’s inability to reform the market where Wall Street goes to borrow and lend fixed-income securities is leading to more direct involvement from the Federal Reserve Bank of New York.
At issue is the state of the triparty repo market. This sector is the backbone of bond trading and its high-volume trades are very short term in nature. Since the financial crisis, the market has been beset by problems, among them issues with the documentation of trades. And because the market is dominated by short-term activity, a loss of confidence in a particular firm can kill its access to credit and potentially kill the institution, which can, in turn, create problems for the broader functioning of financial markets….
Learn more at http://blogs.wsj.com/economics/2012/02/15/new-york-fed-to-take-more-direct-role-in-repo-market/?mod=WSJBlog
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